Quinn: John Chen's plan to save BlackBerry

John Chen, the former chief executive of Sybase, is one of the tech industry's most successful turnaround artists. And he has taken on his biggest challenge yet, as chief executive of Waterloo, Canada-based BlackBerry.

I recently sat down with Chen, 59, who still lives in Pleasanton and who eight months ago took the helm of the iconic smartphone maker, to talk about turnarounds.

Silicon Valley has a predictable cycle: Companies experience periods of rapid growth and then, for most of them, a maturation period of flatter growth. For others, contracting revenues can start a tailspin of contracting ambition. Not many survive as independent companies.

John Chen, then CEO of Sybase, talks to the Mercury News on Nov. 14, 2011 in Dublin. Chen is now BlackBerry CEO. (Dai Sugano/Mercury News)
(Dai Sugano)

BlackBerry may not be a survivor. Even Chen compares BlackBerry to a patient in critical condition.

"The first thing you do is stabilization," he said, which means in business getting the financials in order. Then, "you examine what is driving you to disconnect with customers. If you weren't disconnecting from customers, then you wouldn't need me."

During the past five years, as smartphone growth has taken off worldwide, BlackBerry has lost substantial market share to rivals such as Samsung and Apple, even though Blackberry all but pioneered the market.

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Its bread and butter -- selling to industries and governments that care about security -- is under constant threat from rivals, who are benefiting from the trend of employees having just one device for both work and personal use. A recent partnership announced between IBM and Apple will likely bring more iPhones and iPads into corporate markets.

BlackBerry has responded by slashing costs and laying off workers.

Born in Hong Kong, Chen emigrated to the U.S. with his family as a child. He says he is attracted to hard problems and sees his role as adding value.

The job of the turnaround CEO involves a careful balance between cutting costs, working to keep current customers and then finding something to sell that they want but don't even know they need yet, he said.

"Sometimes you don't know when you should quit trying something," he said. "You don't want to quit too early and you don't want to be too stupid so you are hitting your head against the wall and it doesn't yield."

In the past months, Chen has rebuilt BlackBerry's executive team mainly from people he worked with at Sybase.

How does he convince people to come work for him given the situation?

"I tell them, 'Everything is broken,' " he said. "BlackBerry is iconic. A lot of people have an opinion about it. A lot of people think it's dying, dead or should be. This is our chance to show they are wrong."

Even in crisis, he says he aims to be a low drama leader.

"In a turnaround, it is so hard to get good talent," he said. "If you have a reputation of disassembling a team and firing, no one will put their hearts into it."

With Sybase, Chen had some luck on his side. The company, struggling financially, missed out on the 1990s e-commerce boom. But with the dot-com bust, Sybase's workforce stabilized and Chen was in a financial position to start buying mobile firms that helped Sybase find its new growth market. In 2010, Chen sold the firm to the German firm SAP for $5.8 billion, about a 56 percent premium per share of the price the stock was trading at the time. BlackBerry might not get so lucky.

"He's a brave man to do it," said Ken Dulaney, an industry analyst at Gartner, who says there may be benefits in splitting up the company. "No one should criticize him if it doesn't work out."

"I don't envy the guy," said Mike Levin, partner and co-founder of Consumer Intelligence Research Partners, which pegs BlackBerry's U.S. consumer market penetration as rounding down to 0 percent. "Smartphones are more than a consumer product now. The challenge is going to be to find something distinctive that competitors don't have or won't be able to copy within a year."

For Chen, the question is whether he will have time to find BlackBerry's next thing.

Chen recently sent a memo to employees saying that the company's three-year restructuring process -- which involved shrinking the workforce 40 percent to 7,000 and selling off property -- was over, according to a recent Reuters article. The company would begin to hire and invest, he wrote.

For now, BlackBerry is focused on its core customers in government and industries like finance, banking and health care who value security and long battery life.

"My teenage daughter doesn't really care about those things but the National Security Agency cares, the Department of Defense cares," he said.

If he succeeds, consumers may one day look at BlackBerry as cool again, he said.

"I'll get BlackBerry to the point that my teenage daughter wants to do business with us."